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Posted May 31, 2016 by

How new overtime laws will affect employers

How the new overtime laws will affect employers

Photo by StockUnlimited.com

The new overtime laws that go in place on December 1, 2016 will impact 4.2 million workers who will either gain new overtime protections or get a raise to the new salary threshold.

This is cause for concern for both employees trying to understand the new overtime laws as well as employers who are doing everything they can to understand how these changes affect their business, hiring plans, and compensation packages.

It could result in big changes for those who aren’t prepared, says Stephania Bruha, Operations Manager at Kavaliro, a national staffing agency that employs IT professionals, management, and administrative staff.

 

“We at Kavaliro expect to see many more of our clients limiting employees to 40 hours per week, or requiring executive approval to work overtime hours,” says Bruha. “Recent graduates and new employees may have an advantage here, as they are starting fresh and don’t have to overcome habits from the past.”

Bruha recommends employers get in front of this change. “We will be reassessing our employees more than a month before the new overtime laws go into effect to ensure that if status changes take place, they are well adjusted prior to the go-live date,” says Bruha.

Communication will be key, as in all HR and hiring matters, to ensure your employees understand how they could be affected.

“The worst thing that could happen is for your employees to misinterpret policies and think you are saying they are not allowed to report more than 40 hours a week,” says Bruha. “This is especially important for people who are new to the workforce, like new college grads, who may not know their rights, or have a little experience with labor laws. Employees need to know that you must report all hours worked, but they also need to understand if their company has set requirements for time entry.  Your employer may have severe penalties for violating the policy related to timekeeping because it is so strictly regulated by the Department of Labor.”

Small and mid-sized employers are going to take a hit

Employers – particularly small and mid-sized employers – are going to take a hit with the new regulations, says Kate Bischoff, a human resources professional and employment/labor law attorney with the Minneapolis office of Zelle LLP, an international litigation and dispute resolution law firm. Bischoff is co-leading a June 2, 2016, webinar titled Preparing for Changes to FLSA Overtime Regulations, discussing this topic and more. They will need to raise salaries over the $913 per week threshold or pay overtime.

“This may mean employers hire more people so the need for overtime is less or they raise the costs of their products and services to cover the additional labor costs,” says Bischoff.

New grads or interns looking for work typically don’t wonder whether their first post-grad job will be paid on an exempt (salaried) or a non-exempt (hourly) basis, points out Arlene Vernon, an HR consultant who works with small business owners and corporate clients providing HR strategy and management training. And it’s probably not a consideration regarding whether or not they take a particular job opportunity. However, since a new grad may find himself choosing between two job opportunities, employers need to realize that competitors may change how they present salary and compensation packages based on the new overtime laws, which in turn cold affect the decision an employee makes when deciding between two companies or job offers.

Exempt versus non-exempt employment offers

Let’s say Company A offers the grad $48,000 per year as an exempt position, and Company B offers the grad $46,000 as a non-exempt position. There is the potential that the resulting annual pay under Company B could be higher than Company A if the employee works overtime.  If the person is choosing a job based solely on compensation, this would be a consideration.  However, the real decision is whether the job is the right fit for the person, not whether the employee is eligible for overtime.

“From an employer perspective, all companies, including those hiring new grads, need to re-evaluate all their positions paying less than $47,476 to determine how to handle any job reclassifications to non-exempt status,” says Vernon. “This could impact all or some incumbents in jobs paying around this new limit.”

In making someone hourly, companies are not required to merely take employees’ salaries and divide them by 2080 to get an equivalent hourly rate.  Many companies will assess what overtime the person might be working and recalculate the hourly rate so that when the employee works overtime the employee’s final pay equals the full salaried amount, says Vernon, admitting that this can get confusing.  But in this scenario, the employee may be making less per hour, but the same or even more on an annual basis when you factor in overtime, depending on the employer’s approach.

Some companies will be giving certain employees raises to bring them to $47,476 and keep them as salaried. “This may ultimately cost the employer less money than paying overtime at the lower wage,” says Vernon.

Employers must educate employees

Employers should educate employees who are moving from exempt to non-exempt on what work can and cannot be performed outside of regular work hours, adds Vernon. Exempt employees are accustomed to answering texts and emails at night and during weekends.  They may work whatever hours are needed to get the job done.  As a non-exempt employee, they must track and get paid for any non-scheduled hours worked which will increase their pay, but may be against company policy. Typically hourly employees don’t get to randomly create their own work schedules, while salaried employees do.

“This practice needs to be unlearned by managers and employees,” says Vernon.

For example, are managers who email the now-hourly employees at night and over the weekend now authorizing the employee to respond to the email and inadvertently approving overtime?  Or do managers need to learn to save employee communication for the work week to control payroll costs?

These are among the many changes, challenges and questions employers are sorting out.

“December 1 will be here before we know it,” says Vernon. “This change will have considerable impact on all employers no matter their size and whether or not they hire one or more grads below, at or above the new FLSA range.”

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Posted May 27, 2016 by

How new overtime laws will affect interns and recent grads

How the new overtime laws will affect recent college graduates

Photo by StockUnlimited.com

How will the new overtime laws affect interns and recent grads? A variety of experts weigh in on this hot topic.

Changes to overtime laws

The Department of Labor expects the new overtime laws to affect 4.2 million workers – many of whom are likely new college grads out on their first “real” job.  As of December 1, 2016, the days of working 50+ hours a week and earning $35,000 should be gone, says Kate Bischoff, a human resources professional and employment/labor law attorney with the Minneapolis office of Zelle LLP, an international litigation and dispute resolution law firm. Bischoff is co-leading a June 2, 2016, webinar titled Preparing for Changes to FLSA Overtime Regulations, discussing this topic and more.

Salary versus hourly

There’s one thing college graduates should keep in mind, says Bischoff, and that is that salary has nothing to do with status.

“Being paid a salary doesn’t mean that an employee is more valuable to his or her employer than an hourly employee,” says Bischoff. “It is simply a different way of paying people for their work.”

Those who are nonexempt – those eligible for overtime – may earn time and a half when they work long hours and may even earn more than their salaried brethren, points out Bischoff. Those who are exempt and earn more than $913 a week will not be compensated for their long hours in the office in the form of hourly payments. In fact, when some employees shift from salaried to hourly, many times, they earn more as an hourly employee.

The other thing about being paid on an hourly basis is that employers need to know how much you work, says Bischoff. With apps on smartphones and smart watches, employees can now track their time easier than ever before. “If you track your steps, you can track your hours,” says Bischoff. “The fact that you have to punch in or clock out only means you need to capture your time to get paid the value of your work. That’s all.”

Ask questions to clarify status

So what should college grads do and consider before accepting a job, or if they have questions about their current and future employment status at their existing job? Ask questions such as these, says Bischoff:

  • What will their overtime status be?
  • Will this position be eligible for overtime?
  • Will I be paid a salary?

“For many college grads, work-life balance is important, so ask if you will be able to make it to your volunteer activity every Thursday evening,” says Bischoff. “While asking if you will ‘have to’ work overtime may be a signal to an employer that you might not be a dedicated employee, you can ask about particular events or activities important to you. You may glean from the answer the amount of hours you will put in.”

What do the new overtime laws mean for interns?

Currently, the vast majority of interns earn less than the $23,660 DOL threshold and therefore are classified as non-exempt and qualify for overtime. When the new rules take effect on December 1, 2016, the threshold will almost double to $50,440. The number of interns who earn between $23,660 and $50,440 is miniscule and, therefore, the law will directly impact virtually no interns, says Steven Rothberg, founder of College Recruiter. That said, there could be a substantial impact on new grad hiring as virtually all new grads earn more than $23,660, the average is about $46,000, and a substantial minority earn more than the $50,440.

“At College Recruiter, we believe that the law will have a substantial impact on the number of hours worked by management trainees and other such workers who have traditionally been paid as exempt, salaried employees with no ability to earn overtime pay yet who routinely work far more than the standard 40-hour work week,” says Rothberg. “Employers will likely instruct these employees not to work more than 40-hours per week, which will effectively increase the compensation paid to and reduce the return on investment generated from these employees. Yet with a tightening labor market, more Baby Boomers retiring, and fewer Millennials graduating, it is unlikely that there will be any noticeable change in the number of recent grads finding employment within their chosen career paths.”

Manufacturing director: New OT laws could hurt interns and recent grads

John Johnston is Director of Manufacturing at States Manufacturing, a Minneapolis-based custom electrical and precision fabricated metal company with 49 employees.

He fears the new overtime laws will hurt interns and new hires, namely those graduating from college or technical schools.

“I would expect the starting wage to decrease to compensate for the change in overtime rules,” says Johnston. “Also, I would tend to expect the opportunities to reduce as well as the patience of employers. If we are going to pay more, we are going to raise our expectations and be less patient with someone because of the wage they are earning. When we have had lower wage earners at the start of their career, we are able to be more patient in part because the issues are not as magnified with a lesser wage. Once that increases, we have no choice but to be tougher that much quicker.”

Johnston said his company may avoid hiring interns in the future due to the increased costs and instead balance it with multiple part-time employees. The company currently does not have any interns, partly because they were sorting out the details of the new labor and overtime laws.

“I see this as a trend to save on escalating costs since benefits would not be required with part-time employees,” says Johnston.

A ripple effect for college grads

Elliot D. Lasson, Ph.D., SPHR, SHRM-SCP, is an adjunct professor at the University of Maryland, Baltimore County in Rockville, Maryland and a Human Capital Consultant with Lasson Talent Solutions. Lasson regularly presents to students on behalf of college career centers.

According to Lasson, the new overtime regulations will have ripple affects all around.

“Students who are in college or right out of college want to gain meaningful experience,” he said. “They are not paying all that money to be flipping burgers or driving for Uber after graduation. The conventional wisdom is that internships are valuable. And they objectively are. However, many employers misappropriate that label to justify in order to get free labor from students who feel desperate for that experience. In many cases, internships play out in a way where the students are gaining only minimal exposure to the workplace and field, while at the same time are not getting paid.”

The Department of Labor previously identified six conditions that must be met in order to permit unpaid internship scenarios. “Many employers play fast and loose with these under the pretense that the work environment itself is more important than it objectively is,” says Lasson. And now, this extends to graduate school as well. The grad students are still “students” and therefore unlike their undergraduate peers who are not in graduate school can still “qualify” to be unpaid interns while in graduate school.  So, there is additional abuse of the system here as well, says Lasson.

“With the popularity of unpaid internships, many employers are inundated with requests and may just take advantage of students without having a handle on the DOL guidelines,” says Lasson.

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